The Bloomberg Crypto Outlook for May 2020 goes a step further and says Bitcoin is even superior to gold.

The Bloomberg Crypto Outlook, May 2020 edition, issued by Bloomberg Senior Commodity Strategist Mike Mcglone, is unreservedly bullish on the prospects of Bitcoin. The “firstborn cryptocurrency” seems to be firing on all cylinders, being supported by favorable supply, demand, and macroeconomics. (Bloomberg)

Restricted supply

Bitcoin’s restricted supply will work in favor of the cryptocurrency, says McGlone. Further, he observes that Bitcoin’s halving ritual on May 12 will cut the daily production of the cryptocurrency by half.

“Unlike quasi-currency brethren gold, higher prices won’t be an incentive for more supply,” observes the analyst. It appears that, among “risk-off” assets, McGlone has placed Bitcoin on an even higher pedestal than gold.

Deterioration in global macroeconomic fundamentals, taken with its restricted supply, has increased Bitcoin’s adoption.

“Accounting for almost 70% of all crypto-asset market capitalization, Bitcoin has attained the gold standard, which will endure, in our view,” writes McGlone.

Bitcoin becoming more like gold

Bitcoin has already outperformed most other assets on a one-year basis.

Even in the crypto market, the Bloomberg Galaxy Crypto Index is underperforming Bitcoin.

“In an unprecedented year due to the coronavirus, we see gold and Bitcoin sustaining the upper hand on the back of unparalleled central-bank monetary stimulus,” writes McGlone.

Other macroeconomic factors that will increase Bitcoin’s allure are:

• Rising volatility in stocks,
• Declining bond yields, and
• Unparalleled global central bank liquidity.

Bitcoin stealing a march over equities

McGlone observes that Bitcoin is already superior compared to the S&P 500 index in terms of momentum and volatility.

On momentum, he observes: “The firstborn crypto is recovering above its upward sloping 52 weeks moving average, while the same measure of the S&P 500 is turning downward.”

On Bitcoin’s volatility, McGlone says: “Bitcoin volatility has never been lower versus the stock market, favoring price appreciation in the crypto, if history is a guide.”

In his opinion, therefore, Bitcoin appears to be functioning less like a risk asset, and more toward an alternative store of value, like gold.

Increasing adoption confirmed by derivatives and GBTC interest

McGlone points to the sharp increase in futures open interest and assets which track Bitcoin via products on major stock exchanges.

These represent adoption and demand, portending higher prices, in the analyst’s view.

“Rapidly increasing Bitcoin (BTC) futures open interest indicates maturation, pressure on volatility, increasing adoption, and price support.”

McGlone also points to the growth in assets under management of the Grayscale Bitcoin Trust (OTCMKTS: GBTC). He attributes the phenomenon to increasing interest from dip buyers and buy-and-hold types of investors.

GBTC is the largest crypto asset exchange-traded instrument.

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